Outrageous beer pricing

We just bought a keg for an event that we are hosting and ordered a keg of Blue Moon, assuming it would be a reasonable compromise between craft and macro - a compromise both on taste (target as wide of range of preferences as possible) and more importantly on cost.

I was blown away when my colleague reported that the keg of Blue Moon, brewed by MillerCoors, was $160!! (A keg of Coors Light is $99)

Quickly checking keg prices from the same store (BevMo):
Sierra Nevada: 152.99
Sam Adams Winter: 149.99
Full Sail Amber: 144.99

It's my feeling that these prices are completely out of line and it's a shame that this beer can be sold at this price. Nothing against Blue Moon but I'm shocked that the market isn't more competitive to drive that price lower.

It's a sign of the strength of the brand, however, and probably the pricing power of MillerCoors. To get a sense of what this means for all of the players involved in the supply chain, I checked Connecticut's FOB price (the price the brewery sells to the distributor) for November '09 (FOB is public information in CT). It's $80. So a rough approximation is that the product is marked up by 100% from when it leaves the brewery to the time the beer crosses your lips.

A couple of other data points to help us zero in on where the money is going, you can buy a keg of Tied House beer (a local brew pub) for $60 from BevMo, or the same beer from the brewpub for $44. This is a 34% mark up between the brewery and the retailer (I assume that the brewery can capture most of the distributors margin for beer that doesn't have to get routed through a wholesaler).

So with this 25% margin on kegs from BevMo, we can assume that the Blue Moon keg cost BevMo $120 from the wholesaler for a gross profit of $40. Using the CT FOB pricing, the distributor also makes $40 at a 33% margin or a 50% mark up.

The FOB pricing for a Coors Light keg is $46 and I have a hard time believing that there is that much more cost in the Blue Moon product - I think a lot of that is just their ability to piggyback off of the price points in craft.

A final conclusion - when the growth in craft slows/stops, the craft breweries are going to have a real tough time competing with the scale of the big boys, especially if the big brewers can find a way to play in the craft space as MillerCoors has done with Blue Moon. So far, it's the only exception in my mind but they and AB-InBev have to be working on ways to more effectively get into this more profitable segment.